Apprenticeship levy should be set by independent board and funding ring-fenced

All funds raised by a new Apprenticeship Levy must be ring-fenced for training with the levy rate set at a fair level by a new politically independent Levy Board.

As the Government’s consultation closes today (Friday) the UK’s leading business group has warned that given some previous attempts at introducing a levy have been unsuccessful, proving costly to firms and failing to tackle skill shortages, the new Apprenticeship Levy will need to be proportionate, so as not to put employers off from taking on apprentices and meeting the Government’s 3 million target.

“Business is committed to working with the Government to tackle head on the skills shortages many of our high-growth sectors face, and we have been vocal in our support of employer contributions in the past. The UK must do better in producing more technicians which is at the very heart of our skills problems.

“But at a time when firms are already investing over £40 billion a year on formal training and increasing apprenticeships, there is a high risk it could undermine the system not strengthen it. A new levy won’t be welcomed by business, so we want to see a new politically independent Levy Board setting the rate based on clear evidence with the funds ring-fenced.”

The CBI is calling for the levy to be simple and to give employers real control, uniting standards and funding in one body. It believes that a payroll-based levy would need to be significantly lower than 0.5% of total payroll to be affordable. CBI members are clear that if the levy is set too high, firms won’t be able to deliver the significant amount of training necessary to get more apprenticeship funding back than they put in. That risks less money being available for firms to invest in other forms of training and a reduction in apprenticeship opportunities.

With 2 million additional jobs expected to require higher-level skills by 2022 (UKCES), business recognises that there is a huge skills challenge now and in the years ahead, particularly at levels 4 and 5 - skills relevant to technical and professional work.

Katja Hall, CBI Deputy Director-General said:

“Levies can tend to drive a compliance culture rather than deliver the skills needed on the ground. Firms must and do pay their way, but plans on how to fund apprenticeships must go hand-in-hand with raising the quality of schemes.

“Businesses need to be reassured that a levy is not just a new tax, so all funds must be ring-fenced and protected. We must ensure this does not become a box-ticking exercise aimed at simply boosting numbers, without any real thought to the quality of experience for apprentices and firms.

“Employers have a critical role in boosting UK skills, but to do this they need real control. If business is paying, politicians must let go of the reins.”

The CBI is calling for:

The rate to be set by a new Levy Board, independent of government and providers, at a level that is reasonable to achieve the Government’s aim. It must be set based on sound evidence with the potential for the introduction of a cap on the total levy paid by any one business. The Board should use the Low Pay Commission as its blueprint

The funds raised must be ring-fenced and should only be able to be drawn on by levy-payers to fund apprentice training as the risk of money being diverted away would reduce the focus on the quality and business-relevance of training

The levy must work for all sectors and be set at a level that is proportionate to the ability of firms to deliver apprenticeships and continue to train workers with shorter programmes.

A levy must give employers real control – signing off new standards, setting time rules on spending – to the Levy Board and help ensure that the apprenticeship system meets the need of employers on the ground and the individuals undertaking them

Employer ownership will need to mean that money does not come with Government strings attached. Business and the Levy Board must determine the quality provision required

As an apprenticeship levy is rolled out across the UK, the devolved governments must ensure a share of the funding raised directly supports vocational training and apprenticeships that deliver the higher level skills that businesses and the economy need. Reform is also required to ensure a stronger business voice in the apprenticeship system for Wales, Scotland and Northern Ireland.